Investors continue to pull money from British funds amid Labour Party gloom

Labour’s “gloomy statements” about the UK economy threaten to dampen London’s fragile appetite for stocks, a report warned yesterday.

UK-listed equity funds suffered a net liquidation of £510m last month, more than double the total for July, extending a losing streak stretching back to September 2021.

The report from fund network Calastone came as the FTSE 100 index fell 0.4% to a three-week low of 8,269.60 as concerns about the global economy and a US technology stock bubble spooked investors.

The latest withdrawal figures were not as bad as the monthly average over the past three years, raising hopes that the trend is starting to change.

But Edward Glyn, director of global markets at Calastone, said: “It’s not time to pop the champagne just yet – the government’s gloomy remarks about the UK’s supposedly desperate situation are hardly going to boost confidence.”

It is the latest sign that Labour’s gloomy assessment – ​​and its claim to have inherited the biggest economic disaster since the Second World War – is backfiring.

Prime Minister Sir Keir Starmer has said this will mean “painful” decisions in next month’s Budget, raising fears of tax cuts.

Separate figures this week showed business confidence is falling.

And yesterday’s report showed signs that British investors are nervous about the global stock market amid the latest volatility.

Calastone’s report showed that inflows into equity funds overall fell to £545m in August, down three-quarters compared with July.

Markets were hit by fears of a US recession and saw three days of net selling, although the bleeding soon stopped and money returned later.

Glyn said: “Investors were shocked as markets turmoiled, sending share prices tumbling sharply.”

The “magnificent seven” technology stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) were hit “particularly hard,” he added.

“There was no general defeat,” Glyn said.

‘Outflows turned into inflows as markets calmed and sellers dispersed, but nerves are clearly frayed.’

A report by financial giant Fidelity International said investors had moved away from technology-focused funds, which have been enjoying spectacular gains, as they seek “stability amid market volatility.”

Tom Stevenson, chief investment officer at Fidelity, said: “The technology sector has been a stellar performer, but the past month has been choppy. We’re seeing a classic shift to safety as stability-seeking investors sought to preserve capital amid volatility.”

He said money market funds, which offer exposure to short-term bonds, “have become very attractive again.”

In another sign of the market’s woes, asset manager M&G said it suffered £1.5bn of capital outflows in the first half, as markets stabilised yesterday after a major sell-off on Tuesday.